What is a doorstep loan, how high is the interest and are lenders regulated?
The Department for Work and Pensions has estimated that SEVEN million Brits have been targeted
DOORSTEP lenders can prey on society's most vulnerable, loaning small amounts at exorbitant interest rates.
But what is the reality of the practice, and are lenders regulated? Here's what to know about the shady practice - and how not to get ripped off.
What is a doorstep loan?
As the name suggests, doorstep loans describe when you borrow money and the lender returns to your home to collect the repayments.
The loans - which are also described as home credits - are usually for smaller amounts of up to £500, though this will range.
The money is usually repaid on a weekly or fortnightly basis to an agent who calls at your home.
As with other loans, the interest charges are included in your repayments so you repay a fixed amount each week.
How high is the interest?
Doorstep loans tend to have far higher interest than a bank loan or credit cards.
The interest will differ depending on the lender, but it could be more than 200 per cent of what you originally borrowed.
The Money Advice Service gives the example of a £200 loan, where on a credit card you'd pay back £20, with an interest of £37.
On home credit, you'd have to pay back £30.30 a month, with an interest of £164 - nearly the same that you'd borrowed in the first place.
Are they regulated?
At the moment doorsteps loans and rent-to-own lenders have been largely unregulated.
Complaints about high cost credit have soared to their highest-ever level this year - an increase of 40 per cent, according to new figures from the Financial Ombudsman Service.
The Sun has launched a campaign calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
They are lobbying the Financial Conduct Authority to put a cap on these loans - with the aim that customers never have to pay back more than double the amount they borrow.
Citizens Advice estimates that more than £200million could be saved if a cap was introduced.
A similar cap was introduced for payday loans in 2015 and since then the number of people struggling with unmanageable debts to those lenders has more than halved, according to Citizens Advice.
The Department for Work and Pensions estimate that up to 7 million people have resorted to high-cost credit - usually the poorest in society.
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What are home credit lenders allowed to do?
Home credit lenders are not legally allowed to offer you loans.
They need written permission to visit - even if you already have a loan and the lender offers an additional loan while collecting repayments.
You can ask them to leave at any time, whether or not you've prearranged a visit.
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